On 16 June Leon Perera, a Workers Party NCMP, asked a question in Parliament. I reproduce a screenshot of his post below:
Unfortunately there seems to be some befuddlement among both those who left comments on the post, Ravi Philemon’s daughter Jewel who is a journalist at the Independent Singapore and also in the mind of Leon Perera himself who should really know better as his Wikipedia entry says he studied Politics Philosophy and Economics PPE) at Oxford.
Many of those leaving comments on his FB page asked where the $22 billion loan capital is coming from that Heng mentions in his answer and the terms on which it is lent including how the loan will be repaid. Perera has said these are “pertinent questions” and that “we may need to wait till after the GE to shed some light on these questions.” There is also misunderstanding of what Heng means when he says “Loan capital, which we expect to be repaid in the future and is hence fiscally neutral”
Loan capital actually comprises loans made by the Government to other sectors (in this case the corporate sector). The reason it is fiscally neutral is that the loans are repayable and not actual spending. The actual spending will only be the amount of losses in the even that the loans are not repaid. In fact the loans are made by the banks and guaranteed by the Government. If the borrowers fail to repay the loans the banks will be required to try to recover the loans from the borrowers through the courts first by seizing the assets of the companies. Only in the event that the banks fail to recover the loans in full will the Government be on the hook and then only for the amounts that the banks lose. The problem with this method is that the banks may still be reluctant to make loans to marginal borrowers because of the time-consuming process that they will have to go through in order to recover the loans.
Despite what Leon Perera and many others might think the Government is not borrowing money. It should have no need to since I have shown that even under conservative assumptions it should have net assets of $1.5 trillion.
More at http://www.tremeritus.net/2020/06/24/pap-suka-suka-break-the-constitution-when-it-suits/
Unfortunately there seems to be some befuddlement among both those who left comments on the post, Ravi Philemon’s daughter Jewel who is a journalist at the Independent Singapore and also in the mind of Leon Perera himself who should really know better as his Wikipedia entry says he studied Politics Philosophy and Economics PPE) at Oxford.
Many of those leaving comments on his FB page asked where the $22 billion loan capital is coming from that Heng mentions in his answer and the terms on which it is lent including how the loan will be repaid. Perera has said these are “pertinent questions” and that “we may need to wait till after the GE to shed some light on these questions.” There is also misunderstanding of what Heng means when he says “Loan capital, which we expect to be repaid in the future and is hence fiscally neutral”
Loan capital actually comprises loans made by the Government to other sectors (in this case the corporate sector). The reason it is fiscally neutral is that the loans are repayable and not actual spending. The actual spending will only be the amount of losses in the even that the loans are not repaid. In fact the loans are made by the banks and guaranteed by the Government. If the borrowers fail to repay the loans the banks will be required to try to recover the loans from the borrowers through the courts first by seizing the assets of the companies. Only in the event that the banks fail to recover the loans in full will the Government be on the hook and then only for the amounts that the banks lose. The problem with this method is that the banks may still be reluctant to make loans to marginal borrowers because of the time-consuming process that they will have to go through in order to recover the loans.
Despite what Leon Perera and many others might think the Government is not borrowing money. It should have no need to since I have shown that even under conservative assumptions it should have net assets of $1.5 trillion.
More at http://www.tremeritus.net/2020/06/24/pap-suka-suka-break-the-constitution-when-it-suits/
